It is your tax code that indicates the amount of income tax you must pay. Usually, HMRC updates your tax code for you after receiving data about your income from the company or institution providing your pay.
However, mistakes can happen. A wrong tax code can result in you paying either more or less tax than you are supposed to. Therefore, you should always look over your code and fix any errors. Here’s how you can handle your tax code if you believe it is not set up properly.
What is a Tax Code?
A tax code consists of letters and numbers. It informs your employer or pension provider what tax should be taken from what you earn or receive. Your income, your benefits, and the taxes you have reduced based on reliefs influence it.
How Your Tax Code Could Be Incorrect
Your tax code could be wrong for a variety of reasons.
- You changed jobs recently.
- You started getting a pension.
- You began getting company benefits.
- Your income changed suddenly.
- HMRC has out-of-date information.
If there is an error in your tax code, inform HMRC straight away. It ensures you do not end up paying more or less tax than you should.
Determining Your Tax Code
Look at your payslip. There should be a tax code written near the top of the letter. If you notice “BR”, “0T”, or “D0”, it could be an emergency code.
When there is an emergency tax code, it’s because HMRC does not have all your income details entered. Take care of this straight away to prevent paying any unnecessary taxes.
Use the Online Service
If you want to change your tax code, you can use the HMRC service called “Check your Income Tax.” Using it is fast, simple, and you can do it at your convenience.
Through this service, you can:
- Update your employment details
- Notify the government if your income has changed.
- Offer employees a car for work use or private health insurance.
- Include any income that you missed out on.
- Get tax relief for costs incurred while working.
After you have submitted your information, HMRC will look over it. If there’s a need for a change, they will update your tax code and communicate it to you.
Can’t Use the Online Service?
Even if you cannot access the online system, you may contact HMRC. You may give them a call or send them a letter. Have your National Insurance number and your income information at hand.
In some cases, HMRC can request additional details. Whenever they have all necessary details, they can update your tax code as needed.
After Your Tax Code is Adjusted
If there is a change in your tax code by HMRC, they will inform you. Authorities will inform your employer or your pension company. Whenever you receive your pay, make sure to review your payslip.
You should see:
- Your new tax code
- Sometimes, the new code can cause changes in your pay.
- Adjustments made for any taxes not paid correctly
If you have paid too much in tax, it will show as a refund in your next payslip. If tax is owed, they have the right to collect it from the money you pay in the future.
Helping Someone Else?
To help a relative or a client update their tax code, utilize the PAYE Coding Notice query form. This comes in handy for tax return accountants or individuals responsible for processing someone else’s taxes.
Tax return at the end of the year
At the end of the tax year, HMRC looks to see if you paid the amount of tax that you should have. If you paid too much or too little, they will send you a letter to let you know. This could be:
- A P800 tax calculation letter
- A Simple Assessment letter
The letter will let you know if you are getting a refund or if you still owe more taxes.
How to Receive a Refund or Make the Payment
When you receive a P800 letter for overpaid tax, you can make a claim online. If you did not pay enough, the letter will describe the steps to make a payment. Sometimes, your unpaid tax will be taken from your salary by HMRC over a period of time.
Conclusion
You should regularly update your tax code. When your code is not done correctly, it might result in you paying either more or less tax than what you should pay. You can use HMRC’s online service called “Check your Income Tax” or simply phone them to sort out the issue.
When your tax code is updated by HMRC, ensure you review your next payslip. It ought to present your updated code and any salary changes.
If you want extra security, you can get advice from tax return accountants. They can swiftly fix problems and ensure that the details are correct. With their help, you don’t have to worry about taxes and can concentrate entirely on your work.